A leading law firm today warned that the amount being claimed from estates in inheritance tax is rising sharply as the economic recovery starts to drive up property and share prices.
Experts at Higgs & Sons say official figures show that the inheritance tax-take has already risen by nearly 30 per cent since bottoming out in 2009/2010 at the depth of the economic slump.
And Ian Bond, partner at Higgs’ widely-respected private client team, says a combination of an increased focus by the taxman on the tax (IHT) and the economic recovery means IHT receipts will soar again this year.
But he said there was a raft of ways for people to legally reduce their exposure to the tax whilst still retaining control of their assets.
Ian said the tax was currently charged at 40 per cent above the tax-free threshold, which Chancellor of the Exchequer George Osborne had confirmed would remain at £325,000 until at least April 2018.
He said that the property market boom had led to a steady growth in receipts from IHT and the number of estates liable to pay it.
“At the peak of the UK housing market in 2007/08, six per cent of all estates at death were liable for IHT with total receipts from the tax being £3.8 billion,” Ian said.
“Subsequently receipts from this tax dropped quite sharply, with the onset of the recession and the associated slump in house prices. In 2009/10, the worst year for average house prices, the tax raised £2.3 billion and was claimed on fewer than four per cent of all estates.
“But figures from the Office of National Statistics show the IHT take in the tax year 2012/2013 was £3.1 billion, up from £2.9 billion the previous year and the third increase in a row.”
Ian said the introduction of a transferable allowance for spouses and civil partners, which allowed married couples and civil partners to utilise both persons’ allowances to reduce the amount of IHT paid when the second person passed away, had also reduced the overall take, costing the exchequer an estimated £1 billion per year.
But he said the recovery and freezing of the threshold was now driving up the number of estates exposed to the tax, with new figures from the Office of National Statistic for IHT receipts for the year to date shows that IHT is forecast to be in the region of £3.5 billion in 2013/14.
He urged anyone worried about the tax to seek advice to reduce the amount the taxman could demand from their estate.
“There are several steps that people can take to reduce, or in some cases eliminate, the potential of paying IHT when they die.
“Making a tax efficient will is just part of the process of protecting and preserving wealth and ensuring that you leave a suitable legacy of your lifetime’s achievement.
“This is not about giving the assets away before they die to avoid the liability but retaining the assets they have with the full control of their estate.”
He said Higgs & Sons private client team offered a full review of a client’s estate, family affairs and existing wealth succession and protection arrangements.
“This review ensures that clients benefit from all the available opportunities to protect their wealth against tax, relationship breakdown and dissipation both while in their ownership and when it moves to the next generation. We seek to maximise the use of all available reliefs and exemptions as allowed by the IHT legislation. We “play by the rules” and clients get piece of mind that they have provided for the preservation of their wealth for the generations to come.”
Higgs & Sons works from two offices in the Black Country – Waterfront Business Park in Brierley Hill and Kingswinford. The firm employs more than 200 people, which includes over 100 specialist lawyers.
For specialist advice on all aspects of private client work, contact Ian on 0845 111 5050 or email Ian.Bond@higgsandsons.co.uk